Toward a Political Economy of Macroeconomic Thinking
AbstractThis paper investigates, in a simplified macro context, the joint determination of the (incorrect) perceived model and the equilibrium. I assume that the model is designed by a self-interested economist who knows the true structural model, but reports a distorted one so as to influence outcomes. This model influences both the people and the government; the latter tries to stabilize an unobserved demand shock and will make different inferences about that shock depending on the model it uses. The model's choice is constrained by a set of autocoherence conditions that state that, in equilibrium, if everybody uses the model then it must correctly predict the moments of the observables. I then study, in particular, how the models devised by the economists vary depending on whether they are "progressive" vs. "conservative". The predictions depend greatly on the specifics of the economy being considered. But in many cases, they are plausible. For example, conservative economists will tend to report a lower keynesian multiplier, and a greater long-term inflationary impact of output expansions. On the other hand, the economists' margin of manoeuver is constrained by the autocoherence conditions. Here, a "progressive" economist who promotes a Keynesian multiplier larger than it really is, must, to remain consistent, also claim that demand shocks are more volatile than they really are. Otherwise, people will be disappointed by the stabilization performance of fiscal policy and reject the hypothesized value of the multiplier. In some cases, autocoherence induces the experts to make, loosely speaking, ideological concessions on some parameter values. The analysis is illustrated by empirical evidence from the Survey of Professional Forecasters.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17431.
Date of creation: Sep 2011
Date of revision:
Publication status: published as Gilles Saint-Paul, 2012. "Toward a Political Economy of Macroeconomic Thinking," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 8(1), pages 249 - 284.
Note: ME POL
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Other versions of this item:
- Gilles Saint-Paul, 2012. "Toward a Political Economy of Macroeconomic Thinking," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 8(1), pages 249 - 284.
- Gilles Saint-Paul, 2011. "Toward a Political Economy of Macroeconomic Thinking," NBER Chapters, in: NBER International Seminar on Macroeconomics 2011, pages 249-284 National Bureau of Economic Research, Inc.
- Saint-Paul, Gilles, 2011. "Towards a Political Economy of Macroeconomic Thinking," IDEI Working Papers 678, Institut d'Économie Industrielle (IDEI), Toulouse.
- Saint-Paul, Gilles, 2011. "Towards a Political Economy of Macroeconomic Thinking," CEPR Discussion Papers 8464, C.E.P.R. Discussion Papers.
- Saint-Paul, Gilles, 2011. "Towards a Political Economy of Macroeconomic Thinking," TSE Working Papers 11-244, Toulouse School of Economics (TSE).
- A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-22 (All new papers)
- NEP-CBA-2011-09-22 (Central Banking)
- NEP-MAC-2011-09-22 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Angeletos, George-Marios & Alesina, Alberto, 2005.
"Fairness and Redistribution,"
4553009, Harvard University Department of Economics.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Economists' political bias and model choice
by Economic Logician in Economic Logic on 2011-10-10 15:10:00
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